Building business in a volatile environment
Posted Tue, 20 Sep 2005
In 1984, Herman Mashaba started Black Like Me, a manufacturer of hair and beauty products. This was a first. Until then, black people had been in the industry as owners of hair salons, but not in the industry's manufacturing sector.
Black Like Me went on to become one of the biggest and most successful manufacturers of hair and beauty products in South Africa.
Mashaba asserts that running a big manufacturing concern during apartheid days was not easy. For one thing, the Group Areas Act prohibited black people from living or engaging in any business activity in areas that were for whites only.
Running a business in such an area meant breaking the law. Mashaba overcame this obstacle by taking on a white business partner. However, there were many other obstacles that came with that hostile environment.
It is on this basis that Mashaba will be speaking about "Building a Business in a Volatile Environment" during the Leadership in Transformation conference in Johannesburg on November 1-2.
"I started my business ten years before South Africa became a democratic country. Operating in that hostile, apartheid environment has taught me one lesson that can be useful to other business people.
"I do not regard myself as a business guru. In fact, I dropped out of university and I do not have any formal qualifications. But I have been through the school of hard knocks and that has taught me most of what I know about business."
Mashaba says after 1994, there was an abundance of business opportunities as democratisation yielded fruits of equitable distribution of opportunity. However, he personally chose to remain on the outside looking in as the opportunities continued to unfold. There were many offers.
"I was approached by many people hoping to interest me in one BEE deal or the other. But until three years ago, I felt I was not ready. When I decided the time was right to enter the BEE arena, I came in with the intention of fulfilling two critical goals that I had set for myself: Contributing to the development of sustainable black-owned-and-managed businesses and making money without being apologetic about it."
Mashaba says he has set himself the task of developing a minimum of ten top black CEOs by the year 2014 as part of his contribution to the South African business leadership profile.
"My rationale is that I make investments in companies but do not play an executive role. As I make investments, I ensure that there are black people who have equity in these organisations and that they play an effective executive role.
"I also provide them with the required mentorship and other support systems. The reality is that many black business people and managers fail because they are put in senior executive positions and left to their own devices, without any support. It would be reasonable to say such people are set up for failure."
Mashaba says the SA government has taken a bold stance on Black Economic Empowerment, creating valuable opportunities for black people to enter the economic mainstream.
However, he believes these opportunities will not be exploited fully unless strategies are developed and employed to remove obstacles that stand in the way of successful BEE deals.
The situation is worsened by the fact that South Africa's apartheid past has created a low skills base, and the fact that some business sectors continue to pursue policies that are unfriendly to the development of black business.
"There is a common perception that BEE deals have come to be the privilege of a few black people. There is a lot of truth in this. Partly, this trajectory came about because there is only a certain number of black business people who have access to the finance, the skills pool and the deals themselves.
"The ideal is to widen the pool of black BEE participants by identifying suitable candidates and taking them into the pool by the hand. Put simply, people would feel comfortable with giving me a BEE deal because they believe I have the track record, the access to finance and the skills to make a success of it.
"By bringing in a young executive to run the business, I am giving that person an opportunity to become a big player in the marketplace."
Mashaba emphasised that Black Economic Empowerment is crucial to the success of South Africa as a country that offers equitable opportunity.
"The challenge lies in the fact that while at a political level, one can come up with policy and legislation to drive things in a chosen direction, that is not the case in business.
"Issues such as capacity, development of governance, the attitude of the financial markets and other factors can play a major role in turning a good concept into a huge failure."
Mashaba puts much emphasis on developing business leadership and expanding capacity. He adds that this cannot be developed overnightt - the process has to start now with projections of reaching its peak over two or three generations.
While he shows clear disapproval of efforts to keep black people out of the mainstream, Mashaba says it is important to appreciate the role that can be played by people of other races in accelerating the growth of businesses that have a Black Economic Empowerment foundation.
His own experience taught him the system of not reinventing the wheel.
His white partner in Black Like Me was a highly experienced production manager.
The skills he brought to the company enabled it to manufacture good quality products within a few weeks of the factory opening. In turn, he passed valuable skills to others in the company.
"I think that can be replicated today. You can bring together black and white businesses and ensure that they come together on a basis of mutual beneficiation."
Asked whether there is a special mantra that can be developed to produce successful black business leadership, Mashaba says there are several basic principles that can determine failure or success.
Firstly, he says there has to be vigilance that will ensure that opportunities that arise are used to great effect. In addition, he emphasised that there has to be a sense of responsibility, integrity and a clear understanding that a successful business has to go beyond an individual and be based on a broad, long term view.
"The important factor is that we should learn to work hard. We should be careful to avoid developing a merchant class that will want to play golf every second day.
We need to look beyond our own personal needs and look at building businesses that will prove to be truly sustainable, businesses that can outlive us. In order to do that, we need to develop effective organisational strategies and create a culture of working like slaves in order to live like kings.
We should encourage black people to make money. The economy is in an excellent position to produce a good number of new millionaires. That will increase business equity."
Commenting on his choice of subject at the conference, Mashaba says the subject is close to his heart.
"Building Business in a Volatile Environment is a subject that I relate to very closely. This is something I wish to share - get people to see how we succeeded as Black Like Me in a volatile environment.
"I want to contribute towards developing business leadership in South Africa. I would not like people to judge me purely on the basis of the amount of money I make out of black economic empowerment.
"I want to use the experinece that I have gathered to help build a key business leadership corps."
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